Agents never become stewards: explaining the lack of innovation in public–private partnerships
| Author | Anne-Marie Reynaers,Salvador Parrado |
| Published date | 01 September 2020 |
| Date | 01 September 2020 |
| DOI | http://doi.org/10.1177/0020852318785024 |
| Subject Matter | Articles |
Article
International
Review of
Administrative
Sciences
Agents never become
stewards: explaining
the lack of innovation
in public–private
partnerships
Salvador Parrado
National University of Distance Education (UNED), Spain
Anne-Marie Reynaers
Universidad Aut
onoma de Madrid, Spain
Abstract
Design–Build–Finance–Maintain–Operate contracts, as a specific public–private
partnership, supposedly provide opportunities for innovation due to the long-term
perspective, the use of output specifications and the collaborative environment. The
literature suggests that the dynamics between procurers and consortia influence the
actual contribution of these conditions to innovative practices. We therefore assess in
three cases in the Netherlands and Spain how and to what extent the relationship
between procurers and consortia affect these three conditions and therewith the
possibilities for realising innovation and for capturing economic and social value.
Findings show that the potential of Design–Build–Finance–Maintain–Operate contracts
for innovation is hampered because procurers and consortia behave like principals and
agents who distrust each other and who let short-term self-interested goals prevail
over long-term pro-organisational goals. The cases have shown that the limited reali-
sation of innovation and less-than-expected value generation seem to be due to the
absence of a clear scheme that allows for capturing value.
Corresponding author:
Salvador Parrado, UNED – Ciencia Pol
ıtica y de la Administraci
on, c/Obispo Trejo, s/n Madrid 28015, Spain.
Email: sparrado@poli.uned.es
International Review of Administrative
Sciences
2020, Vol. 86(3) 427–443
!The Author(s) 2018
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/0020852318785024
journals.sagepub.com/home/ras
Points for practitioners
•Potential innovation in Design–Build–Finance–Maintain–Operate contracts is
restricted to the building of the infrastructure and the early operational phases
of the contract because renegotiation clauses are normally too rigid.
•An adequate system to work out financial risks that create economic value for the
contractor are needed to produce social value through innovation.
•The contract needs to work out a ‘binding’ collaboration scheme among the
consortium members to reap the benefits of innovation.
Keywords
agency theory, Design–Build–Finance–Maintain–Operate contracts, innovation, part-
nerships, stewardship theory, value creation
Introduction
Design–Build–Finance–Maintain–Operate (DBFMO) contracts are a specific type
of public–private partnership (PPP) that transfer the responsibility for the design,
construction, maintenance, operation and financing of public infrastructure (such
as highways and water purification plants) or public utility service buildings (such
as schools, hospitals and detention centres) to a multi-headed consortium through
a long-term performance contract (Reynaers, 2014). Extant literature suggests that
three specific conditions of DBFMOs facilitate innovation: the long-term perspec-
tive; the use of output specifications; and a collaborative environment (Bloomfield,
2006; Grimsey and Lewis, 2005; Hodge and Greve, 2007; Yescombe, 2007).
Empirical contributions on innovation in DBFMOs suggest that such condi-
tions do not generate innovation per se. Rather, the answer to whether innovation
is realised seems to depend on whether public procurers and private firms are able
to generate economic (Kivleniece and Quelin, 2012) and social value through inno-
vation (Caldwell et al., 2017; Mahoney et al., 2009). When the interaction allows
for the creation of such value, defined as ‘the sum or entirety of benefits obtainable
from the exchange’ (Kivleniece and Quelin, 2012: 275), innovation is likely to
be realised.
The extent to which public–private interaction allows for value creation and
innovation is likely to depend on how the relationship between public procurers
and private firms is governed. Caldwell et al. (2017), for example, show that rela-
tional rather than contractual coordination fosters innovation and social value
creation. Although this latter study, and other studies focusing on innovation
and distinct frameworks, provide valuable insight into the impact of innovation
in DBFMOs (see, among others, Fischer et al., 2006; Javed et al., 2013; Roehrich
and Caldwell, 2012; Roehrich et al., 2014; Roumboutsos and Saussier, 2014;
Wang, 2014), we detect three gaps that we want to explore.
428 International Review of Administrative Sciences 86(3)
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